It wants to become a "global bank", "changing banking worldwide". Ambitious goals are those that would have been credited to Deutsche Bank a few years ago. Today it's a start-up that thinks so big. N26, a banking app from Berlin, launched this week in the US.
The financial firm from Berlin announces the expansion just in the week in which Germany's largest financial institution from the claim to want to be a global investment bank. Deutsche Bank is shrinking, it is reducing 18,000 jobs – while N26 is growing and growing. That shows how much the financial world is changing.
Hardly any sector is currently in such a state of flux as the banking industry. This is particularly evident at Deutsche Bank, which has repeatedly tried to give itself a new strategy in recent years. Several CEOs had to leave. Now Christian Sewing is trying a radical cure. Investment banking is being cut back and business with German companies is to be brought back into focus. In Germany too, many jobs are likely to disappear.
If you believe experts, you can not do without such big changes. From too many banks are under pressure. With digitization, customers are transacting more and more banking transactions online. At the same time, the low interest rates are causing problems for the banks. As if that was not enough, there is also the strict regulation that makes banking more bureaucratic. The consulting firm Oliver Wyman believes that many financial institutions will not survive this change. Of the 1,600 banks in Germany today, she estimates, there will only be 150 to 300 left in ten to fifteen years.
Germany still has an extremely large number of banks
What was an advantage for Germany for a long time now becomes a problem: the small-scale banking system. Unlike in France, where only a few large banks dominate the market, there are traditionally many, sometimes small, institutions in Germany. These include 365 savings banks and 875 cooperative banks. As a result, the competition is great. Even though the fees for banking services are rising in this country, customers pay a lot more abroad. Accordingly, banks find it easier to make money there.
In general, the gap between German and foreign institutions has been growing ever since the financial crisis. While Goldman Sachs and JP Morgan have long made high profits, Germany is still busy with the clean-up work. Politicians have realized that, too. Federal Finance Minister Olaf Scholz (SPD) therefore brought a merger of Deutscher Bank and Commerzbank into play earlier this year. Germany needs again "strong, globally active financial institutions to accompany our companies", so his wish.
Meanwhile, however, the merger has burst and the Deutsche Bank shrunk. Does Scholz have to worry about that? Are the German banks losing connection? Not necessarily, my banking experts like Hans-Peter Burghof from the University of Hohenheim. "A big bank is not necessarily strong," he says. "On the contrary. The bigger a bank becomes, the more complex it becomes to manage it. "
Deutsche Bank had to learn this the hard way. From the late eighties, she went into investment banking, wanted to make it the US houses. Alfred Herrhausen, the bank manager, said at the time: "What we admire and do not possess is the Anglo-Saxon culture in the money business." But from today's point of view, that was the wrong path. "That has led to cultural conflicts in the bank," says Burghof.
On the one hand stood the German, down-to-earth bank officials, on the other hand the risk-loving investment bankers. The size of the trenches to this day was revealed this week. While some of the employees in the New York branch were dismissed, others were allowed to adjust tailor-made suits during office hours. "That would not be conceivable in Germany," says Burghof.
One could overlook these cultural differences if the numbers had been right. But they did not do that for a long time. Instead of making money, Deutsche Bank has recently made losses on investment banking. In spite of all efforts, Deutsche Bank was unable to keep up with the US investment banks – for example, in the financing of acquisitions and mergers of large corporations.
"Deutsche Bank wanted to play on a global scale," says Volker Brühl of the Center for Financial Studies in Frankfurt am Main. "Except for a few isolated cases, but she did not succeed." Even in the weddings of investment banking under Josef Ackermann, Deutsche Bank could not redeem this claim. "It's only logical to focus on the European business now," he says.
"A self-run will not change"
The question remains whether the new, smaller Deutsche Bank fare better than before. "A self-runner certainly will not," says Brühl. Sewing wants to focus the business more on corporate clients. But this market is fiercely contested in Germany. For smaller companies, the institute is in competition with savings banks and Volksbanks, which have the advantage of their proximity to the region. In addition to Commerzbank, other major European banks such as BNP Paribas, Credit Suisse and HSBC are vying for larger SMEs and DAX companies.
"Initially, these institutes concentrated primarily on the Dax companies, but for two or three years now they have been wooing German SMEs," says Bruhl.
At the same time, making money is difficult in this business. Strong competition and low interest rates are depressing returns. So far, Sewing has been responding by cutting costs through redundancies and more digital offerings. This is not enough to be successful in the long term. Brühl says, "Sewing must find an answer to the question of where the bank's earnings should come from in the future."